Montpelier Re Reports Fourth Quarter and Full Year Financial Results
Montpelier Re Reports Fourth Quarter and Full Year Financial Results
* Fully converted book value per common share of $26.14, a 17.0% increase
for the full year, including common dividends.
* A 46% loss ratio and 81% combined ratio for the full year, which includes
$94 million, or 15 points, of net losses incurred as a result of windstorm
Sandy.
Business Wire
HAMILTON, Bermuda -- February 7, 2013
Montpelier Re Holdings Ltd. (NYSE: MRH), (“Montpelier” or the “Company”), a
leading global provider of property catastrophe reinsurance and other
specialty lines, today reported its financial results for the fourth quarter
and year ended December 31, 2012.
Fully converted book value per common share was $26.14, a decrease of 1.3% for
the fourth quarter and an increase of 17.0% for the full year, each computed
after taking into account common share dividends declared during each period.
The operating loss for the quarter was $0.31 per common share ($17 million)
and the net loss was $0.48 per common share ($27 million), each expressed
after preferred share dividends. The net loss for the quarter includes $3
million of realized and unrealized investment gains, $3 million of net foreign
exchange losses and a $10 million loss on early extinguishment of debt.
Despite the loss for the quarter, operating income for the year was $2.58 per
common share ($151 million) and net income was $3.67 per common share ($214
million), each expressed after preferred share dividends. Net income for the
year includes $82 million of realized and unrealized investment gains, $9
million of net foreign exchange losses and a $10 million loss on early
extinguishment of debt.
Net premiums written were up 2% in the quarter, or 19%, when adjusting for
reinstatement premiums ($5 million) and the sale of MUSIC ($15 million).
The quarterly result included a $94 million loss (net of reinsurance
recoveries and reinstatements) from windstorm Sandy, consistent with our
December announcement, which was partially offset by $26 million in prior-year
loss reserve development. The combined ratio was 116% for the quarter. The
loss ratio and the combined ratio for the full year were 46% and 81%,
respectively.
Net investment income for the quarter was $17 million and $67 million for the
full year. The total return on the investment portfolio was 0.6% for the
quarter and 5.2% for the full year.
Christopher Harris, President and Chief Executive Officer, said, “I am pleased
with our performance for the year. Despite windstorm Sandy, we produced 17%
growth in fully converted book value per share on the strength of our balanced
underwriting portfolio and solid investment results. Both our Bermuda and
Lloyd’s underwriting platforms delivered strong profitability.”
“We were also pleased to further expand our underwriting partnerships with the
successful launch of the Blue Capital asset management platform in December.”
Mr. Harris continued, “Our underwriting teams executed well during a
competitive January renewal season. We expect a modest increase of 1% to 5%
for net written premiums in the first quarter of 2013 driven by targeted
growth in our property catastrophe and marine portfolios offset by reductions
within certain other specialty lines.”
During the fourth quarter the Company repurchased 590,000 common shares at an
average price of $22.52 per share ($13 million). During 2012, the Company
repurchased 5,981,589 shares at an average price of $20.22 per share ($121
million).
As of December 31, 2012, total shareholders' equity was $1.6 billion and total
capital was $2.0 billion. On October 5, 2012, the Company issued $300 million
of 10-year senior notes with a 4.7% coupon. The proceeds from this issuance
were used to redeem, on November 5, 2012, our then outstanding $228 million
6.125% senior notes due in 2013, with the balance being used for general
corporate purposes.
Please refer to Montpelier’s December 31, 2012 Financial Supplement for more
detailed financial information, which is posted on the Company’s website at
www.montpelierre.bm.
Montpelier, through its operating subsidiaries, is a premier provider of
global property and casualty reinsurance and insurance products. Additional
information can be found in Montpelier's public filings with the Securities
and Exchange Commission.
Earnings Conference Call:
The Company will conduct a conference call, including a question and answer
session, on Friday, February 8, 2013 at 8:00 a.m. Eastern Time.
The presentation will be available via a live audio webcast accessible on the
Company's website at www.montpelierre.bm or by dialing 1-877-317-6016 (US toll
free), 1-412-317-6016 (international) or 1-855-669-9657 (Canada toll free). A
telephone replay of the conference call will be available through March 8,
2013 by dialing 1-877-344-7529 (toll-free) or 1-412-317-0088 (international)
and entering the passcode 10023494.
Application of the Safe Harbor of the Private Securities Litigation Reform Act
of 1995
This press release contains forward-looking statements within the meaning of
the United States federal securities laws, pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995, that are
not historical facts, including statements about our beliefs and expectations.
These statements are based upon current plans, estimates and projections.
Forward-looking statements rely on a number of assumptions concerning future
events and are subject to a number of uncertainties and various risk factors,
many of which are outside the Company's control. See “Risk Factors” contained
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011,
as filed with the Securities and Exchange Commission, for specific important
factors that could cause actual results to differ materially from those
contained in forward- looking statements. In particular, statements using
words such as “may,” “should,” “estimate,” “expect,” “anticipate,” “intend,”
“believe,” “predict,” “potential,” or words of similar meaning generally
involve forward-looking statements.
Important events and uncertainties that could cause our actual results, future
dividends on, or repurchases of, our common shares or preferred shares to
differ include, but are not limited to: market conditions affecting the prices
of our common shares or preferred shares; the possibility of severe or
unanticipated losses from natural or man-made catastrophes, including those
that may result from changes in climate conditions, including, but not limited
to, global temperatures and expected sea levels; the effectiveness of our loss
limitation methods; our dependence on principal employees; our ability to
effectively execute the business plans of the Company, its subsidiaries and
any new ventures that it may enter into; the cyclical nature of the insurance
and reinsurance business; the levels of new and renewal business achieved;
opportunities to increase writings in our core property and specialty
insurance and reinsurance lines of business and in specific areas of the
casualty reinsurance market and our ability to capitalize on those
opportunities; the sensitivity of our business to financial strength ratings
established by independent rating agencies; the inherent uncertainty of our
risk management process, which is subject to, among other things, industry
loss estimates and estimates generated by modeling techniques; the accuracy of
written premium estimates reported by cedants and brokers on pro-rata
contracts and certain excess-of-loss contracts where a deposit or minimum
premium is not specified in the contract; the inherent uncertainties of
establishing reserves for loss and loss adjustment expenses, unanticipated
adjustments to premium estimates; changes in the availability, cost or quality
of reinsurance or retrocessional coverage; changes in general economic and
financial market conditions; changes in and the impact of governmental
legislation or regulation, including changes in tax laws in the jurisdictions
where we conduct business; the amount and timing of reinsurance recoverables
and reimbursements we actually receive from our reinsurers; the overall level
of competition, and the related demand and supply dynamics in our markets
relating to growing capital levels in our industry; declining demand due to
increased retentions by cedants and other factors; the impact of terrorist
activities on the economy; rating agency policies and practices; unexpected
developments concerning the small number of insurance and reinsurance brokers
upon whom we rely for a large portion of revenues; our dependence as a holding
company upon dividends or distributions from our operating subsidiaries; and
the impact of foreign currency fluctuations.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the dates on which they are
made.
MONTPELIER RE HOLDINGS LTD.
CONSOLIDATED BALANCE SHEETS
(in millions of U.S. dollars, except share and per share amounts)
unaudited
December 31, December 31,
2012 2011
Assets
Fixed maturity investments, at $ 2,738.6 $ 2,390.2
fair value
Equity securities, at fair value 40.9 96.1
Other investments 138.5 102.4
Cash, restricted cash and cash 401.4 468.7
equivalents
Total Investments and 3,319.4 3,057.4
Cash
Reinsurance recoverable on unpaid 102.7 77.7
losses
Reinsurance recoverable on paid 6.7 7.7
losses
Insurance and reinsurance premiums 222.9 213.4
receivable
Unearned reinsurance premiums 22.2 22.0
ceded
Deferred insurance and reinsurance 48.4 50.9
acquisition costs
Accrued investment income 15.2 16.2
Unsettled sales of investments 48.9 33.9
Other assets 23.7 20.3
Total Assets $ 3,810.1 $ 3,499.5
Liabilities
Loss and loss adjustment expense $ 1,112.4 $ 1,077.1
reserves
Debt 399.1 327.8
Unearned insurance and reinsurance 270.1 265.9
premiums
Insurance and reinsurance balances 54.0 44.0
payable
Liability for investment 138.8 136.3
securities sold short
Unsettled purchases of investments 148.7 69.9
Accounts payable, accrued expenses 57.6 29.2
and other liabilities
Total Liabilities 2,180.7 1,950.2
Shareholders’ Equity
Non-cumulative preferred shares 150.0 150.0
Common shares and additional 1,056.1 1,165.7
paid-in capital
Common shares held in treasury, at (23.1 ) (22.0 )
cost
Retained earnings 449.7 259.7
Accumulated other comprehensive (3.3 ) (4.1 )
loss
Total Shareholders’ 1,629.4 1,549.3
Equity
Total Liabilities and $ 3,810.1 $ 3,499.5
Shareholders’ Equity
Common and common equivalent
shares outstanding:
Common shares outstanding (000s) 55,270 sh 60,864 sh
Common and common equivalent 56,596 61,625
shares outstanding (000s)
MONTPELIER RE HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in millions of U.S. dollars, except per share amounts)
unaudited
Three Months Ended Year Ended
December 31, December 31,
2012 2011 2012 2011
Underwriting
revenues
Gross insurance
and reinsurance $ 94.4 $ 91.7 $ 735.3 $ 725.5
premiums written
Ceded
reinsurance (11.0 ) (10.1 ) (119.6 ) (101.5 )
premiums
Net insurance
and reinsurance $ 83.4 $ 81.6 $ 615.7 $ 624.0
premiums written
Gross insurance
and reinsurance $ 193.0 $ 179.2 $ 736.3 $ 721.1
premiums earned
Earned
reinsurance (36.4 ) (30.9 ) (119.8 ) (98.4 )
premiums ceded
Net insurance
and reinsurance 156.6 148.3 616.5 622.7
premiums earned
Underwriting
expenses
Loss and loss
adjustment (154.2 ) (138.6 ) (373.8 ) (701.4 )
expenses -
current year
Loss and loss
adjustment 26.3 18.0 87.4 89.3
expenses - prior
year
Insurance and
reinsurance (24.7 ) (27.7 ) (96.6 ) (105.4 )
acquisition
costs
Operating (19.6 ) (22.1 ) (79.4 ) (88.3 )
expenses
Incentive
compensation (9.4 ) (3.0 ) (36.8 ) (10.3 )
expenses
Underwriting (25.0 ) (25.1 ) 117.3 (193.4 )
income (loss)
Net investment 16.8 17.1 67.1 68.7
income
Other revenue - 0.2 0.8 0.5
Net realized and
unrealized 3.5 31.5 82.4 26.2
investment gains
Net foreign (2.3 ) (1.4 ) (12.8 ) (5.2 )
exchange losses
Net income
(loss) from (1.1 ) (0.1 ) 3.2 (3.1 )
derivative
instruments
Interest and
other financing (5.9 ) (4.9 ) (20.4 ) (20.6 )
expenses
Gain on sale of - 11.1 - 11.1
MUSIC
Loss on early
extinguishment (9.7 ) (9.7 ) -
of debt
Income tax
benefit 0.4 - (0.3 ) 0.6
(provision)
Net income (23.3 ) 28.4 227.6 (115.2 )
(loss)
Dividends
declared on (3.3 ) (3.4 ) (13.3 ) (9.1 )
non-cumulative
preferred shares
Net income
(loss) available $ (26.6 ) $ 25.0 $ 214.3 $ (124.3 )
to common
shareholders
Net income $ (23.3 ) $ 28.4 $ 227.6 $ (115.2 )
(loss)
Net change in
foreign currency 0.3 0.1 0.8 2.1
translation
Comprehensive $ (23.0 ) $ 28.5 $ 228.4 $ (113.1 )
income (loss)
Basic and
diluted earnings $ (0.48 ) $ 0.40 $ 3.67 $ (2.01 )
(loss) per
common share
Insurance
ratios:
Loss and loss
adjustment
expense ratio:
Current year 98.5 % 93.4 % 60.6 % 112.6 %
Prior year -16.8 % -12.1 % -14.2 % -14.3 %
Loss and loss
adjustment 81.7 % 81.3 % 46.4 % 98.3 %
expense ratio
Acquisition 15.8 % 18.7 % 15.7 % 16.9 %
costs ratio
Operating 12.5 % 14.9 % 12.9 % 14.2 %
expense ratio
Incentive
compensation 6.0 % 2.0 % 6.0 % 1.7 %
expense ratio
Combined ratio 116.0 % 116.9 % 81.0 % 131.1 %
MONTPELIER RE HOLDINGS LTD.
RECONCILIATION OF NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
TO OPERATING INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS ^1
(in millions of U.S. dollars)
unaudited
Three Months Ended Year Ended
December 31, December 31,
2012 2011 2012 2011
Net income (loss)
available to common $ (26.6 ) $ 25.0 $ 214.3 $ (124.3 )
shareholders
Add (subtract):
Net realized (6.2 ) (9.1 ) (56.7 ) (34.6 )
investment gains
Net unrealized
investment losses 2.7 (22.4 ) (25.7 ) 8.4
(gains)
Net losses from
investment-related 0.4 2.7 - 9.0
derivative
instruments ^2
Net foreign exchange 2.3 1.4 12.8 5.2
losses
Net losses (gains)
from foreign
exchange-related 0.8 (2.7 ) (3.5 ) (7.0 )
derivative
instruments ^2
Gain on sale of MUSIC - (11.1 ) - (11.1 )
Loss on early
extinguishment of 9.7 - 9.7 -
debt
Operating income $ (16.9 ) $ (16.2 ) $ 150.9 $ (154.4 )
(loss)
Operating income
(loss) per common $ (0.31 ) $ (0.27 ) $ 2.58 $ (2.50 )
share
MONTPELIER RE HOLDINGS LTD.
BOOK VALUE PER COMMON SHARE ^1
unaudited
Dec. 31, Sept. 30, Dec. 31,
2012 2012 2011
Book value per share
numerators (in
millions of U.S.
dollars):
Shareholders' equity $ 1,629.4 $ 1,674.0 $ 1,549.3
less: Non-cumulative (150.0 ) (150.0 ) (150.0 )
preferred shares
Fully
converted
[A] book value $ 1,479.4 $ 1,524.0 $ 1,399.3
per common
share
numerator
Book value per share
denominators (in
thousands of common
shares):
Common
[B] shares 55,270 sh 55,523 sh 60,864 sh
outstanding
Restricted
share units 1,326 1,741 761
outstanding
Fully
converted
[C] book value 56,596 sh 57,264 sh 61,625 sh
per common
share
denominator
Book value per common $ 26.77 $ 27.45 $ 22.99
share [A] / [B]
Fully converted book
value per common 26.14 26.61 22.71
share [A] / [C]
Change in fully
converted book value
per common share: ^3
From
September -1.3 %
30, 2012
From
December 31, 17.0 %
2011
^1 These measures constitute "non-GAAP financial measures" as defined in
Regulation G and as further described herein.
Represents the portion of our net income or expense from derivative
^2 instruments that constitute investment and foreign exchange gains and
losses.
Computed as the change in fully converted tangible book value per
^3 common share after taking into account common dividends declared of
$0.115 and
$0.43 during the three and twelve month periods ended December 31,
2012, respectively.
Contact:
Montpelier Re Holdings Ltd.
Investors:
William Pollett, 441-299-7576
SVP, Chief Corporate Development and Strategy Officer and Treasurer
or
Media:
Jeannine Menzies, 441-299-7570
Corporate Affairs Manager
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